Fitch: Rosneft can afford USD 15bn for TNK-BP; Russian shareholders to bid also.

By bne IntelliNews September 27, 2012
Fitch Ratings believes that Russia's largest oil company's Rosneft creditworthiness indicators are sufficient to raise USD 15bn for acquiring 50% stake in country's 3rd largest oil producer TNK-BP from British Petroleum and keeping the BBB-/Stable rating. However, a more substantial increase of the leverage without flexible dividend and investment policy could lead to one-notch rating downgrade, which would keep it in the investment grade category. To remind, Standard & Poor's announced placing the BBB- rating of Russia's largest oil company Rosneft on Watch Negative, attributing it to Rosneft's intentions to acquire a 50% stake in TNK-BP. Agency believes that should the deal take place it is going to worsen Rosneft's creditworthiness and would pressure the rating. This week head of Rosneft Igor Sechin (long-time Vladimir Putin's aide curating fuel and energy sector in his administration appointed to head Rosneft after Putin's inauguration) confirmed company's interest in acquiring a stake in TNK-BP owned at parity conditions by British Petroleum and Russian AAR alliance (Alfa group, Access Industries and Renova controlled by tycoons Mikhail Friedman, Leonard Blavatnik and Viktor Vekselberg, respectively). Rosneft is interested in BP's 50% stake that could be swapped for shares in Rosneft (12.5% according to previous reports or more as part of the Rosneft's privatisation plan), while Rosneft is also ready to negotiate acquiring AAR stake in TNK-BP as well. Various unofficial sources reported that company seeks a USD 15bn loan to finance the deal. At the same time, AAR is going to make an all-cash offer of USD 20bn-USD 30bn for a 50% stake in TNK-BP vs. USD 10bn bid for 25% stake made previously, France-Presse reports citing the sources close to the deal. However, it is most likely that BP is going to opt for Rosneft's proposal as it is eyeing access to Rosneft's resources since last year: USD 16bn share swap between two companies was negotiated already in 2011 as a part of a failed strategic alliance between two companies on Arctic shelf exploration, which was blocked by AAR Alliance through Stockholm Arbitration Court. After exiting TNK-BP, BP would have to find a compensating resource base (TNK-BP accounts for about a fourth of BP's reserves and output). Acquisition of a stake in TNK-BP would consolidate Rosneft's market share greatly: TNK-BP also controls 50% stake in Slavneft, two companies accounting for about 16% of Russia's oil extraction. According to the Industry and Energy Ministry Rosneft was the leader in terms of oil output in 2011, producing 114.5mn tonnes of oil, 22% of total output.

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